Credit and Risk Management (SD-BF-CM)
Credit managementPurpose
Outstanding or uncollectible receivables can spoil the success of the company greatly. Credit Management enables you to minimize the credit risk yourself by specifying a specific credit limit for your customers. Thus you can take the financial pulse of a customer or group of customers, identify early warning signs, and enhance your credit-related decision-making. This is particularly useful if your customers are in financially unstable industries or companies, or if you conduct business with countries that are politically unstable or that employ a
restrictive exchange rate policy.
Integration
If you are using the Accounts Receivable (FI-AR) component to manage your accounting and an external system for sales processing, Credit Management enables you to issue a credit limit for each customer. Every time you post an invoice (created in FI-AR), the system then checks whether the invoice amount exceeds the credit limit. Information functions such as the sales summary or early warning list help you to monitor the customer’s credit situation.
If you are using both the Accounts Receivable (FI-AR) component to manage your accounting and the Sales and Distribution (SD) component for sales processing, you can also use Credit Management to issue credit limits for your customers. You can make settings in Customizing to decide the scope of the check and at what stage in the process (for example, order entry, delivery or goods issue) a credit limit should take place. General information functions are also available for use with credit checks.
Features
If you are using both the SD and FI-AR components, Credit Management includes the following features:
Depending on your credit management needs, you can specify your own automatic credit checks based on a variety of criteria. You can also specify at which critical points in the sales and distribution cycle (for example, order entry, delivery, goods issue) the system carries out these checks.
During order processing, the credit representative automatically receives information about a customer’s critical credit situation.
Critical credit situations can also be automatically communicated to credit management personnel through internal electronic mail.
Your credit representatives are in a position to review the credit situation of a customer quickly and accurately and, according to your credit policy, decide whether or not to extend credit.
You can also work with Credit Management in distributed systems; for example if you were using centralized Financial Accounting and decentralized SD on several sales computers.
Management in
Settings for Credit and Risk Management
Monitoring Credit During Sales and Distribution Processing
PurposeThis process enables you to monitor credit when processing customer orders. Prerequisites
You have implemented the Accounts Receivable (FI-AR) and Sales and Distribution (SD) application components.
The master data for those customers whose credit you wish to monitor is created in both Sales and Distribution and Financial Accounting.
The credit data for those customers whose credit you wish to monitor is created. You determine how high a customer’s credit limit is to be when creating this data.
In Customizing for Enterprise Structures you defined one or more credit control areas and assigned these to one or more company codes.
In Customizing for Sales and Distribution you defined at which point (when an order is received or when delivery is carried out, for example) the credit check should take place. You do this under Basic Functions →Credit Management/RiskManagement → Credit Management → Define Automatic Credit Control.
Process flow
You enter a sales order.
Assuming that this sales order leads to the credit limit being exceeded for this customer, the system now responds in one of two ways (depending on the settings you made in Customizing for Sales and Distribution.) For more information, see Automatic Credit Control.
It outputs an error message, but prevents you from saving the order.
It outputs a warning message, but does not prevent you from saving the order. It blocks the order.
In the second case, the procedure continues as follows:
2. If the order is blocked, the credit representative processes the blocked order either from a list of blocked sales and distribution documents, or from his/her Mailbox. You define whether or not a mail is sent to a credit representative in Customizing under the menu path Logistics – General ® Promotion ® Message Determination.
The credit representative now decides how to proceed with this order. From the list of blocked documents he or she can use the Information Functions (such as credit master sheet and early warning list) in Credit Management to help make the decision.
3. Once the credit representative releases the order, a delivery can be created and a billing document generated.
Once you have saved this document, the system automatically creates a financial accounting document.
incoming payment inAccounts Receivable. Processing an Accounting Transaction Using Credit Management
Credit Control Area
DefinitionAn organizational unit that represents the area where customer credit is awarded and monitored.
This organizational unit can either be a single or several company codes, if credit control is performed across several company codes. One credit control area contains credit control information for each customer.
Use
Credit and risk management takes place in the credit control area. According to your corporate requirements, you can implement credit management that is centralized, decentralized, or somewhere in between.
For example, if your credit management is centralized, you can define one credit control area for all of your company codes.
If, on the other hand, your credit policy requires decentralized credit management, you can define credit control areas for each company code or each group of company codes.
Credit limits and credit exposure are managed at both credit control area and customer level. You set up credit control areas and other data related to credit management in Customizing for Financial Accounting. For more information, see the Implementation
Guide under Enterprise Structure →
Definition or → Assignment → Financial Accounting and then Maintain credit control area. You assign customers to specific credit control areas and specify the appropriate credit limits in the customer master record.
See also: Specifying Credit Limits by Credit Control Area
Credit and Risk Management Settings: Overview
Structure
The following graphics illustrate the relationship between credit control area, company code, sales organization, customer and currency for central or decentralized credit management respectively.
Decentralized Credit Management
If your credit policy requires decentralized credit management, you can define credit data for your customer for each company code. In the graphic below, the customer has a business relationship with two company codes:
You define a currency for each credit control area. The relationship between credit control area, company code, sales organization and currency is illustrated in the following graphic:
Central Credit Management
If your credit management is centralized, you can combine your company codes in one credit control area. Credit management then regards the customer as valid for all company codes. In the following graphic, the customer has a business relationship to two company codes that are combined in one credit control area:
The next graphic illustrates the relationship between the credit control area, company code, sales organization and currency in a central organization. If the credit control area includes company codes with different local currencies to that of the credit control area, the system converts the receivables into the currency of the credit control area.
Deriving the Credit Control Area
You have four ways of deriving a credit control area:
Company code
Sales area (sales organization, distribution channel, division)
The sales areas can be assigned to a credit control area in Customizing (Enterprise Structure → Assignment→ Sales and Distribution → Assign sales area to credit control area).
Customer master (payer’s sales area segment)
User exit EXIT_SAPFV45K_001
You can use this user exit to derive the credit control area from all the fields in the sales order header.
In the last three options, the credit control area must also be assigned to the company code. You do this by going to Customizing and choosing Enterprise
structure → Assignment → Financial Accounting.
Caution
If you are working with distributed systems, note the following (and also see Credit Management in Distributed Systems):
In distributed systems (centralized Financial Accounting, decentralized sales processing), each decentralized sales computer must be assigned to its own credit control area. In other words, you cannot make multiple assignments for one credit control area.
The alternative credit control areas in the decentralized computer must also be different, which makes the following scenario impossible:
The central Financial Accounting department in your company would like to influence the credit policy for some customers in an international subsidiary that uses a decentralized sales computer. To do this, the centralized and decentralized sales computers would have to belong to the same credit control area. However, this is not permitted for distributed systems
because open orders are not distributed between sales computers.
If you post documents directly in FI that are not related to sales and distribution processes, you must enter the credit control area manually as the system doesn’t.
The credit control area is determined in the following sequence: 1. User exit
2. Distribution channel 3. Customer master
4. Company code for the sales organization
to change the assignment or make a new one, you have to restructure the credit limit.
Specifying Credit Limits by Credit Control Area
Credit limits are normally specified by credit management staff in the individual customer master records. You can specify individual credit limits for each credit control area. You can expand your credit control for a customer by specifying a central credit limit for all credit control areas to which that customer is assigned. The total of the limits at the level of the credit control area must not exceed the
total limit for all credit control areas. The credit limits at the control area level are checked
during sales order processing.
In the following graphic, a central credit limit has been divided between the two credit control areas D1 and D2. The total limit at group level of 10,000 USD corresponds to the total of the individual limits at credit control area level. The individual limits do not exceed the upper limit of 7,000 USD specified by the group.
Creating Credit Data
PrerequisitesYou have created a master record for the customer in question.
Procedure From the
Credit Management screen, choose Master data → Change.
Enter the name of your customer, the credit control area, and the views with which you want to work.
The total credit limit and the credit limit per control area are both maintained under Central data.
You enter the credit limit itself under Status.
2. Choose the Central data screen and enter the following data:
-Individual limit
-Currency
Enter the currency for the total limit and maximum individual limit.
The credit limit is managed in a separate credit limit currency, which you determine for each control area. This currency is separate from the local (company code) currency. To update the credit limit data, the system converts the amounts. This has no effect on the updating of the transaction figures or on any postings.
You can enter the central data in any currency you choose, independently of the currencies of the control areas.
-The fields in the section entitled Current credit limit assigned show to what extent (as a percentage) the customer has exhausted the amount of credit granted to him, and in which credit control area the maximum individual credit limit has been exhausted to the greatest extent.
-The Last general info field displays when the last information on the customer was obtained. 3. Now access the Customer Credit Management Change: Status screen and enter the
individual credit limitfor the customer.
If you wish, you can also enter the following data on this screen:
A/R Summary Data
A/R summary data is used in
Decentralized Credit Management. This data enables several decentralized SD systems to operate active Credit Management in conjunction with a central FI system. It contains all the (summarized) information on a credit management account (in a credit control area) that is necessary for the credit check in SD.
Even in a non-distributed system, it may be advisable to run the SD credit check against this A/R summary since reading this data is much less time-consuming than repeatedly reading open items (thus
improving system performance.)
The data determined in this way from the A/R summary can be
integrated in the credit overview in line layout variants. You can then identify those credit management accounts for which the credit check will report an error when the next incoming orders are made.
to trigger the relevant checks, you can assign a risk category to a customer. This risk category determines which checks the system should carry out when processing orders in Sales and Distribution. Credit
Representative Groups
You can assign credit management employees to a credit representative group. The credit representative group is transferred into the order and can be used as a selection criterion for evaluations and release
functions. Customer Credit
Group
You can define groups of customers in accordance with your company’s needs. Customers can for example be grouped by industry, country, or other criteria that help you carry out Credit Management more
specifically. The credit representative can use these groups to select blocked documents for processing and to generate reports for statistical analysis.
Customer Group You can group customers into customer groups according to criteria that you yourself define. For example, you can group customers by industry or country. The customer group enables you to process this customer group more specifically or to carry out evaluations for this customer group.
Texts At credit control area level, you can enter memos for each customer. You define this memo as a certain text type (for example, internal information). Which text types are relevant depends on the way your system is configured. For each text type, you can create a new text in another language.
Central texts for a customer are entered in the customer master record in the general data area.
If texts for this customer exist, the Text exists field is marked. See also:
Entering Texts
Storing
Documents on the Customer
If you implement SAP’s ArchiveLink, you can store documents for each customer. You can then scan annual reports into the system, assign them to a customer and display them using the master record display function.
The system creates documents for a customer in the general data area of the customer master record.
To display a document for a customer at the credit control area level, or to assign a new document, on theCustomer Credit Management
Change: Statusscreen, choose Extras
®Documents. The system displays a dialog box in which the linked documents are shown. You can also assign a new document to the customer here.
See also:
Assigning Documents
4. Save your data.
Result
You have created the credit data for a customer.
Credit Limits for Groups of Customers
Use
You can assign a credit limit to a group of customers, as well as to an individual customer. If a company has different branches, you would define the credit limit for just one customer in this group (the head office) and this customer account then becomes the credit account.
Procedure
To assign a credit account to a branch account, from the Credit Management screen, choose Master data → Change.
Enter the name of your customer, the corresponding credit control area and select the Status indicator.
The system displays the Change Customer Credit Management: Status screen.
Choose the function Edit® Change credit account. In the dialog box that appears, you can enter the credit account (the account number of the customer you are using) to set the credit limit for the entire group.
After you choose
ENTER, the system contains the credit limit of the branch as 0.00. The Credit account field displays the account number of the customer for which the reference credit limit is defined.
You can only specify a credit account within a credit control area.
The accumulating total of receivables is recorded both for the reference customer and the "dependent" customer. However, the system checks only against the reference customer as to whether the credit limit has been exceeded.
When displaying the credit account, you can view which customers are referenced to this account. To do this, from the credit account master data screen, choose Edit ® Cust. for credit acct.
Result
Defining Credit Limits for New Customers
Use
If you create a master record for a new customer, but do not define any credit data, no credit control is performed for this customer.
If you want a new customer to be automatically subject to credit control, then you need to create a credit control area for new customers.
Procedure
In Customizing, choose Enterprise Structure® Definition ® Financial Accounting ® Maintain credit control area.
Now choose Edit® New entries.
Enter a Credit control area (for example NEW) and enter data in at least one of the Risk category, Credit limit,and Rep.group fields.
3. Save your data.
Result
You have now created a credit control area for new customers for which a credit check is effective as soon as the customer has been created.
Processing Credit Data
All of the following functions are accessed from the Credit Management screen.
Function Menu path Further information
Changing Credit Data
Master data → Change
Displaying Credit Data
Master data → Display Displaying Credit Data
Making Mass Changes
Master data → Mass changes The system may prevent you from making postings to customers if the date of the next credit limit check has already passed. To prevent this
happening, you can reset the date to a later date for a certain specified number of customers.
Displaying Changes to Credit Data
Master data → Display changes. To display changes to credit data on a cross-account basis, use report
RFDKLIAB. Deleting Master data → Change.
Credit Data Enter the name of your customer, the corresponding credit control area and select either Status or Central data.
Choose Credit
management ®Delete ® Central data or Control area data.
Resetting Credit Limits
Resetting Credit Limits
Displaying Credit Data
Use
Monitoring a customer’s credit situation.
Procedure
From the Credit Management screen, choose Master data → Display.
By choosing Extras and Environment, you can display a customer’s payment data, dunning data, and view the payment history.
2. Choose the views Overview and Status and choose Enter.
On the Customer Credit Management Display: Overview screen, the system displays the individual credit limit, the existing total liabilities, and the credit limit used (percentage). The Day Sales Outstanding (DSO) figure is also displayed. The DSO figure is an index of the relationship between outstanding receivables and sales achieved over a given period. In the standard system, this figure is calculated by taking into account current receivables, and a period of 3 months plus the days of the current month. When displaying the credit
management data for a given customer, the basis on which the DSO figure is calculated can be viewed by choosing Extras ® DSO calculation.
In Customizing for Financial Accounting, you can define other parameters by which DSO is calculated. You do so in the activity Define Preliminary Settings for Credit Management. If you have recorded the customer’s payment history (see the indicator Rec.pmnt
hist. indicator under Payment transactions view in the customer master record) or made other internal specifications, this data is also displayed here.
3. Choose Enter. The system displays the Customer Credit Management Change: Status screen
on which the following data is displayed:
-Receivables from sales (unless they are marked as disputed items)
-Special liabilities relating to special G/L transactions which you marked as credit limit-relevant (down payments for example)
-Sales value
By choosing Extras → Sales value you can break the sales value down into open orders, open deliveries and open billing documents.
-Credit exposure
When you post a customer invoice or create a billing document, the system automatically adds the amount to the existing receivables or to the receivables from special G/L
transactions. When you post the incoming payment, the amount is subtracted from current receivables.
Resetting Credit Limits
Use
You need to reset credit limits if you have:
Assigned a company code to a new control area
Changed the assignment of company codes to control areas
Changed the currency of a control area
Altered the classification of a difference reason code from disputed to non-disputed (or vice versa).
Procedure
From theCredit Management screen, choose Tools → Reset credit limit.
Enter one or more customers, one or more credit control areas, and any further selections you require.
Choose Program → Execute in background.Result
The customer’s credit limit is now reset.
Sales and Distribution Functions in Credit Management
All of the following information functions are accessed from the Credit Management screen.
Function Menu path
Processing blocked sales and distribution documents from a list
→
Exceptions → Blocked SD documents Processing blocked sales and distribution →
documents from the SAPoffice inbox
Exceptions → Mail/inbox
Processing blocked sales orders Sales and distribution docs → Sales and distrib. documents blocked for delivery Processing incomplete sales and
distribution documents
Sales and distribution docs → Incomplete SD documents
Processing deliveries Sales and distribution docs→ Deliveries
Processing billing documents Sales and distribution docs→ Billing documents
Sources of Information in Credit Management
UseCredit Management contains a range of functions to assist you in processing blocked sales and distribution documents, and to help investigate critical cases.
Features
The following graphic illustrates these sources.
The following section describes the different ways in which you can access information in Credit Management. The table under “Activities” describes how to access these various functions.
Customer master record
The customer master record contains the data (address, telephone and fax number, dunning procedure, sales
data and so on) that you require to be able to conduct business with the customer. To learn how to display a
customer master record, see
Displaying Customer Master Records
Account analysis
The account analysis function enables you to call up information on a customer account. You can then view
the customer’s payment history (for example, do they usually qualify for cash discount? How many days
early do they pay their items on average?). This information assists you in assessing a customer’s liquidity
and likely payment record in the future.
Line items, line item longest overdue, most recent payment
Credit master sheet
The credit master sheet displays such credit data as the current and maximum credit limit, and the total of
deliveries, orders, and invoices outstanding.
Credit overview
The credit overview shows certain additional data including dunning data, open items and texts on the
customer.
Early warning list
This list displays which customers are to viewed as critical as determined by the credit check in the Sales
and Distribution (SD) application component. A customer is classified as critical if, based on the data that
you defined under Automatic Credit Control (in Customizing for Credit Management under Sales and
Distribution→ Basic Functions → Credit Management/Risk Management → Credit Managment ), he or she
would not satisfy the following checks (carried out using the information from the A/R summary), either
now or in the near future:
a) Longest outstanding open item b) Overdue open items
c) Highest dunning level permitted
d) Next date on which customer is checked e) Age of the data in the A/R summary f) Percentage of credit limit used up
Financial Information System (FIS)
You can use the FIS to carry out customer evaluations online, structured according to your own
requirements. Due date analyses, payment history evaluations, and DSO figure calculations are just some of
the functions you can perform.
You can summarize or breakdown the data produced in these reports - from open item display to the
customer credit management data - to whatever degree you require. You can also edit and present the data
from the reports graphically.
Sales Information System (SIS)
Activities
You access the information functions from theCredit Management screen.
Function Menu path Further information
Account analysis
Account → Analysis For more information, see Account Analysis
Line items Item → Display Oldest due
item
Master data → Display
Enter customer and credit control area. ChooseContinue
Extras →Oldest item
A dialog box appears with the most important data for this item (document number, amount, days in arrears).
Last payment Master data → Display
Enter customer and credit control area. ChooseContinue
Extras → Last payment
The system displays the date, amount, and currency of the last payment.
Credit master sheet
Credit management info system →Credit master sheet
For more information, choose Help→ Application help You can also access this function from the initial screen by choosingAccounting → Financial
accounting→ Accounts receivable → Periodic
processing → Info system → Report selection → Credit management.
Credit overview
Credit management info system →Overview
See above
Early warning list
Credit management info system →Early warning list
Financial Information System (FIS)
Environment → Financial Accounting→Info system
For more information, see the Financial Information System
Sales
Information System (VIS)
Environment → Sales and distribution →Info system
For more information, see the Sales Information System
Credit Management in Distributed Systems
UseYou can carry out credit checks from Sales and Distribution (SD) in the following scenario: Central Financial Accounting and decentralized SD processing
The decentralized Sales and Distribution units all have independant credit management. This means maintenance of credit master data, checks in SD, and realeasing via the credit
manager are all carried out de-centrally.
As only credit-relevant data for the corresponding Sales and Distribution unit is available for credit checks on the decentralized Sales and Distribution units for the sales order, delivery and goods issue, and credit account data is also needed from the head office (for example, sum of open items, oldest open item, maximum dunning level), Financial Accounting (FI) makes the A/R Summary available.
With the help of the A/R Summary, the credit data can be collected in the central system, and sent, via ALE distribution functions, to decentralized Sales and Distribution
processing, and can be evaluated. The A/R summary presents the inquiry in Financial Accounting for credit checks.
As the credit-relevant SD data (open sales order, delivery and billing document values) is not distributed, there are specific prerequisites for working with distributed systems.
Prerequisites for Working With Distributed Systems
When working with distributed systems, one of the following terms must be fulfilled:
The decentralized Sales and Distribution units must be available via separate credit control areas (there must not be a multiple assignment).
or
Different customers must be assigned to each of the decentralized Sales and Distribution units (there must not be a multiple assignment).
or
Credit checks in the decentralized Sales and Distribution units can be carried out with reference to FI data (for example, static credit limit check without open credit values from Sales and Distribution, dunning level etc.)
Degree of ageing
You can set the allowed degree of ageing in Customizing for Sales, under Basic
Functions → Credit Management/Risk Management → Credit Management → Define Automatic Credit Control.
Under Checks in financial accounting/ old A/R summary, you can enter the permitted degree of ageing for the A/R summary, in the fíelds Permitted days and Permitted hours. Here, you can define how old the A/R summary can be, in order to be called up for a check. If the permitted degree of ageing for the A/R summary is exceeded in the credit check, then the document is blocked.
Fields allowed days and allowed hours are only available for entry if you have entered an X in fieldRead A/R Summary in Customizing. The path is: Accounts Receivable and
Accounts → Credit Management → Credit Control Account → Make basic settings for credit management. Updating
The A/R summary is either sent periodically (with the help of the report RFCMCRCV) from central Financial Accounting to the decentralized Sales and Distribution units according to ALE distribution model or, if an obsolete A/R summary is presented, updated for the credit check by the system per remote function.
In order that the system is burdened as little as possible, SAP recommends you stick to the following order:
1. Program run: Incoming payments in central FI
2. Program run: Distribution A/R summary from central FI to decentralized Sales and Distribution units
3. Program run: Renewed credit check for blocked sales documents in decentralized Sales and Distribution units
Status Management for Obsolete A/R Summary
If the A/R summary is obsolete, the credit status Credit data obsolete is set. This means that the document is blocked, and appears in the credit representative’s worklist. In Customizing for Sales, in the section Automatic Credit Control, for the single, aforementioned checks, for which FI data is necessary, you can define whether a warning appears in the obsolete data, or whether a status is set.
If you are working with the A/R summary, and would like to re-process obsolete data, it is recommended that you set a status.
Reports for Credit Management
The following table provides an overview of all the reports available to you in the area of credit management
Program Function
RFDKLI10 Customers with missing credit data
This report checks the data for the credit limit for completeness, and produces the corresponding error lists. These can be used to re-maintain the
corresponding definitions manually, or per Batch Input. RFDKLI20 Reorganization of credit limit for customers
This report enables you to reorganize the credit limit information in the control areas.
RFDKLI30 Short overview credit limit
The report lists the central and control area-related data per customer. RFDKLI40 Overview credit limit
The report provides you with an extensive overview of the customer’s credit situation.
RFDKLI41 Credit master sheet
The credit master sheet enables you to display and print out the customer master data for a single account, which is needed for the area of credit management.
RFDKLI42 Early warning list
The early warning list enables you to display and print out customers in credit management, who are viewed as critical customers in the area of credit checks in SD.
RFDKLI43 Master data list
The master data list enables you to display and print out customers’ credit cards. In particular, you can display information not contained in the standard system, for example, user-defined fields or external data, which you have created with specific additonal software.
RFDKLI50 Mass change credit limit data
This report allows quick mass change for master data in credit management. RFDKLIA
B
Change display, credit management
With this report, you can display changes for credit management master data for all accounts.
RVKRED0 6
Checking blocked credit documents
The report checks all blocked documents from credit view. The report is started in the background, and should run after the incoming payments programs. RVKRED7
7
Reorganization credit data SD
The report enables you to reorganize open credit, delivery and billing document values. It is used, for example, when updating errors occur. RVKRED0 Checking sales documents which reach the credit horizon
8
The report checks all sales documents, which reach the dynamic credit check horizon, as new. The report runs periodically, and should run at the start of a period. The period for the ‘date of the next credit check’ is proposed from the current date, with the help of the period split for open sales order values. RVKRED0
9
Checking the credit documents from credit view
Released documents are only checked if the validity period for the release has run out (number days).
RVKRED8 8
Simulation reorganization credit data SD
In order to execute a report
1. Choose System ® Services ® Reporting.
Enter the name of the report.
Choose Program® Execute. Enter the selection criteria.
Choose Program
®Execute or Program ®Execute and Print.Postings Without Credit Limit Checks
UseYou can exclude the following postings from the credit limit check:
Special G/L transactions
Postings with an alternative reconciliation account Features
Special G/L transactions
You can specify whether each special G/L transaction should be included in the credit limit check. In the standard system, down payments are included in this check, but not down payment requests.
When checking the credit limit, the system updates three comparison totals. These include:
Open receivables
Special G/L transactions (e.g. down payments and bills of exchange)
Sales order values, value of goods to be delivered, and billing document value from SD When the system checks as to whether the credit limit has been exceeded, down payments received are deducted from the receivables. If you do not want them to be deducted, you will need to change the system default values.
You do this in Customizing for Accounts Receivable and Accounts Payable by
for Customer Down Payments 1. Carry out this activity.
2. Choose one of the entries under Sp.G/L.
The system displays the Chart of Accounts Entry dialog box. 3. Enter a chart of accounts.
4. Choose Goto → Properties.
5. Ensure that the field Rel.to credit limit is not selected. Alternative reconciliation account
By making use of an additional (alternative) reconciliation account, you can exclude certain postings from being subject to the credit management update. Proceed by first defining this account in Customizing for Accounts Receivable and Accounts Payable, and then setting the indicator Recon. acct ready for input in the G/L account master record.
This function is used in Japan, where various "safe" receivables often need to be excluded from the credit management update. "Safe" receivables include prepayments and accrued income, and payment by letters of credit.
For more information on this topic, see the Implementation Guide (IMG) for Accounts
Receivable and Accounts Payable under Credit Management → Business Transaction: Credit Monitoring → Define Reconciliation Accts Without Credit Management Update.
Authorizations for Critical Credit Control Fields
Fields in the customer master record that contain sensitive data (for example: credit limit, risk category) can be grouped for authorization purposes. You can then authorize certain credit representatives to change these fields. Without this authorization, the representatives can only display these fields. You control the grouping of credit-sensitive fields in Customizing for Financial Accounting. For information on how to maintain authorizations, see the
online Implementation Guide.
Automatic Credit Controls in SD
You can specify automatic credit checks to meet your own credit management needs. The checks can be carried out at various times during the sales order cycle, from order receipt to delivery.
Within delivery processing, you can further specify that a credit check is carried out when a delivery is created or when goods are issued. You specify data for automated credit control in Customizing for Sales and Distribution. For detailed information about how to enter this data, see the SD Implementation Guide.
Defining an Automated Credit Check
customers, along with specific credit limits. In addition, you define credit groups for document types, known as document credit groups. Document credit groups combine order types and delivery types for credit control purposes. You can define a credit check for any valid combination of the following data:
Credit control area
Risk category
Document credit group
This check is defined for a particular credit control area and for sales orders where the customer has risk category RK2 (medium risk).
System Response
You can define for each checking rule whether the system reacts with an error or a warning. In the case of a warning, the system automatically enters a credit status in the document and saves the document. The status text describes the result of the credit check. It tells you, for example, if the document was blocked because the customer's credit limit was exceeded. Depending on the requirements you define, the document is blocked for further processing for reasons of credit.
Different Types of Credit Checks
You can define any of the following credit checks for various combinations of credit control area, risk category, and document credit group:
Static Credit Limit Check
The customer's credit exposure may not exceed the established credit limit. The credit exposure is the total combined value of the following documents:
- Open orders - Open deliveries
- Open billing documents
- Open items (accounts receivable)
The open order value is the value of the order items which have not yet been delivered. The open delivery value is the value of the delivery items which have not yet been invoiced. The open invoice value is the value of the billing document items which have not yet been
forwarded to accounting. The open items represent documents that have been forwarded to accounting but not yet settled by the customer.
Dynamic Credit Limit Check with Credit Horizon
The customer's credit exposure is split into a static part; open items, open billing, and delivery values (see above), and a dynamic part, the open order value. The open order value includes all undelivered or only partially delivered orders. The value is calculated on the shipping date and stored in an information structure according to a time period that you specify (days, weeks, or months). When you define the credit check, you can then specify a particular horizon date in the future (for example: 10 days or 2 months, depending on the periods you specify). For the purposes of evaluating credit, you want the system to ignore all open orders that are due for delivery after the horizon date. The sum of the static and dynamic parts of the check may not exceed the credit limit.
Maximum Document Value
The sales order or delivery value may not exceed a specific value which is defined in the credit check. The value is stored in the currency of the credit control area. This check is useful if the credit limit has not yet been defined for a new customer. It is initiated by a risk category which is defined specifically for new customers.
Changes Made to Critical Fields
The credit check is triggered by changes made in the document to values in any of the credit-sensitive fields. According to your Customizing settings, the system runs a check credit between changes or differences in the sales order data against the default values in the customer master record. Examples of such fields areterms of payment and fixed value
dates.
Date of Next Review
Uses the date of the next credit review as a trigger for an automatic credit check. If you process a sales order after a customer's next review date has already gone by, the system automatically carries out a credit check.
Overdue Open Items
The relation between open items which are more than a certain number of days overdue and the customer balance may not exceed a certain percentage.
Oldest Open Item
Maximum Number of Dunning Levels Allowed
The customer's dunning level may only reach a specified maximum value.
User-Defined Checks
If you want to carry out checks other than the standard checks, you can define your own checks in the appropriate user exits in Customizing for Sales.
Subsequent Functions in Credit Checks
Use
The result of each check is stored in the document and is used to calculate the overall status. The subsequent functions are the same for all the checks, namely credit limits, payment cards, export credit insurance, and documentary payments.
Features
Using the credit status, you can block the following functions during order processing:
Creating material reservations
Creating purchase requisitions
Creating production orders/planned orders
Creating delivery due indices
Printing order confirmations
Creating deliveries
In Shipping you can use the credit status to block the following functions:
Picking
Packing
Posting goods issue
Printing delivery notes
For particularly important or urgent credit problems, you can use output control to specify that electronic mail messages are automatically sent to the appropriate credit representative.
Reviewing and Releasing Blocked Documents
To ensure quick and effective processing of blocked documents, the SAP standard system offers your credit personnel a working environment that can be tailored to your own needs. Credit personnel can call and process overview lists of the blocked orders and deliveries. For checking purposes, you can also display released documents.
Note
If you are usingSAP Credit Management(FIN-FSCM-CR) then you can also process the
theSAP Credit Managementsystem. For additional information, see the section Special Features when Using SAP Credit Management (FIN-FSCM-CR).
Features Selection
You can use the following criteria to search for documents: Credit control area
Next shipping date Credit account Risk category Standard Variants
The standard provides different report variants for credit personnel to process sales documents:
Report Variants
Function Program
Name
Menu Path
Processing Blocked Sales and Distribution Documents
RVKRED02 Logistics Sales and Distribution Credit Management Exceptions Blocked Sales and Distribution Documents
Processing Released Sales and Distribution Documents
RVKRED03 Logistics Sales and Distribution Credit Management Sales and Distribution Documents Released
Processing All Sales and Distribution Documents
RVKRED01 Logistics Sales and Distribution Credit
Management Sales and Distribution Documents All Output
You receive a list of all documents that meet your selected criteria and that you are
authorized to process. You can sort this list by specific criteria and set up the way in which it is displayed.
Activities
In the output list, you can review the credit situation of any customer and in line with the credit policy, decide how to continue processing the sales and distribution documents. You have the following options:
Grant the credit and release the sales and distribution document Reject the credit and cancel the sales and distribution document
Forward the blocked sales and distribution document to another processor Recheck the blocked sales and distribution document
Reassign the blocked sales and distribution document and specify a new sequence of blocked sales and distribution documents. This enables you to give priority to and release several documents with a low document value until their credit limit is completely used up, instead doing so for a single document with a high document value that has already exceeded its credit limit.
Once you have carried out a particular task (for example, releasing a document), the system displays a processing status in the column to the left of your list.
In the output list, the following functions are possible:
Go to information relevant for credit, for example, credit control data, credit master record Process the document
Note
You can prevent changes from being made to a blocked sales and distribution document until it has been released from the credit viewpoint. To do this, maintain message 134 in
Customizing ofSales and Distributionunder Sales Sales and Distribution Documents Define Variable Messages . In theTypefield, choose "Error". In this case, you cannot make changes from the list.
Special Features When Using SAP Credit Management (FIN-FSCM-CR)
When you useSAP Credit Management, pay attention to the following special features: The output list additionally displays the status of the credit check fromSAP Credit Management(fieldCMPS_CM).
The fields filled with credit-relevant master data from FI/SD Credit Management are hidden in the output list.
Credit-relevant master data maintained in the connected FSCM system (for example, risk category) is displayed but cannot be changed in the ERP system.
Note
You can also process documents – as an alternative to local processing in the Sales and Distribution(SD) system – in theSAP Credit Managementsystem. However, the range of functions differs in some aspects. The prerequisite for processing inSAP Credit Managementis that the system has created a documented credit decision. From the documented decision you can decide how the sales and distribution document is to be processed further. You have the following options:
Recheck the blocked sales and distribution document
Grant the credit and release the sales and distribution document Reject the credit and cancel the sales and distribution document
Processing inSAP Credit Managementhas the advantage that you can process documents from various sales and distribution systems centrally. For more information, see Documented Credit Decision.
For more information aboutSAP Credit Management(FIN-FSCM-CR), seeSAP Credit Management (FIN-FSCM-CR).
Renewed Credit Check for Blocked SD Documents
Use
You can execute a renewed credit check for SD documents that have been blocked due to an XI failure (SAP NetWeaver Exchange Infrastructure) or an error in the credit check.
Integration
Ther ERP system also provides the following batch programs:
●
RVKRED06
New Credit Check for Blocked SD Documents, for example, after incoming payment
●
RVKRED08
Credit Check on Sales Orders that Reach the Credit Horizon
Prerequisites
If you want to execute the credit check, you must have integrated SAP Credit Management into the Sales and Distribution process (BAdI: Connection of SD to SAP Credit Management;
BADI_SD_CM).
Depending on the selection, a database secondary index might be required.
Features
The report Credit Check of Blocked SD Documents (technical errors) (UKM_RVKRED09_XI) executes a newcredit check in background processing for SD documents that have been blocked due to an XI failure (SAP NetWeaver Exchange Infrastructure) or an error in the credit check.
The risk category and credit status can be redetermined for a blocked SD document, if necessary.
You can enter selection criteria for the following data areas:
o Credit information (such as credit control area, credit account, risk category) o Document information (SD document, overall document status, overall credit
status)
o Scope of document (sales documents, deliveries) o Log creation
Informing Credit Representatives Automatically
An interface to electronic mail provides fast communication of urgent credit problems. For example, each credit manager and representative can be defined as an internal mail partner. Urgent credit problems can be routed directly to the appropriate individual for immediate action. Credit personnel also have access to SAPscript word processing and can record credit-related text in either the document or in the scratch pad in the customer master. In addition, credit personnel have access to online credit, financial, and sales information systems.
See also:
Sales Information System
Financial Information System
Authorizations
You can set up authorizations for your credit representatives according to the following criteria:
How much of the available credit limit a particular customer has already used
The value of a particular sales order or delivery Authorization According to Credit Limit
A representative is assigned to a credit representative group and can be authorized to process credit holds for a customer up to a certain level within the customer's credit limit.
A representative may be authorized to process credit holds for customers within a particular risk category whose total credit exposure is below 80% of the allowed credit limit. For
customers whose credit exposure is approaching 100% of their credit limit - in other words, becoming potentially critical - you may want to direct credit holds to senior credit personnel. Authorization According to Document Value
Document value classes enable you to authorize credit representatives to process documents up to a certain value. You start by defining different classes to reflect the ranges of document value that occur in your business. You can then assign particular credit representatives to particular document value classes.
A group of representatives may be authorized to process credit holds where the document value is less than 1,000 USD. However, only the group's manager may authorize credit for documents with values of over 1,000 USD. Sample document value classes are as follows:
Credit control area Amount up to Document value class
EURO 100.00 A01
EURO 1,000.00 A02
EURO 10,000.00 A03
Risk Management for Receivables in SD
PurposeAs well as Credit Management, there are several other ways to guarantee payments including letters of credit, export credit insurance, and payment cards. These forms of payment
guarantees are all integrated in the Risk Management for Receivables component, providing you with an efficient tool for guaranteeing the payment of all billing values that arise in sales and distribution processes.
Integration
You can only use Risk Management for Receivables if you are also using the Sales and Distribution component.
Features
The following forms of
payment guarantee are available in the Risk Management component:
Documentary payment (for example, letters of credit).
Payment cards
Export credit insurance (external link)
The form of payment guarantee controls how you guarantee the payment of a sales document item (for example, using a private guarantee, payment card, unconfirmed or confirmed letter of credit, or export credit insurance). In the first step you can use a secure form of payment such as a letter of credit to try and minimize the payment risk as much as possible. If this is insufficient, you can turn to Credit Management to create a credit limit for restricting the risk. In this way, Credit Management enables you to secure values yet to billed that could not be guaranteed using a form of payment guarantee.
The following graphic shows how credit and risk management work together to minimize your risks.
The vertical axis shows the size of the risk related to the type of guarantee on the horizontal axis. The risk decreases according to the type of payment guarantee in use. For example, the risk is greatest if you use no payment guarantees and is at a minimum when you use letters of credit. (See also
For information about the different areas and Customizing settings you need in the Implementation Guide (IMG) for Credit and Risk Management.
Forms of Payment Guarantee
Definition
The form of payment guarantee controls how the payment of a sales document item is guaranteed.
In Risk Management for Receivables you can use both credit management as well as the following forms of payment guarantee:
Financial documentary payments (for example, letters of credits or documentary collection).
In payment transactions for foreign trade, the letter of credit contains the payer’s order to the bank, instructing them to pay a sum to the recipient of the letter of credit by a certain time, or that this sum should be paid by the bank of the payee. The letter of credit is therefore a reliable guarantee for both exporter and importer. The exporter has the assurance that the bank is liable for payment and the importer can expect the delivery to take place as normal.
Export credit insurance (external link)
This can be used to ensure against a customer who might fail to pay. You can link to external export credit insurance via an interface.
Payment cards
Authorized payment cards also provide a guarantee that payment will be made.
The form of payment guarantee that you will choose to use, depends on the type of business transaction that is being processed. In foreign trade, letters of credit are the most common form of payment guarantee whereas payment cards are increasingly useful in the retail sector. If neither of these two forms of payment guarantee come into play, you can then turn to credit management in order to minimize your risks. In a credit limit check, the guaranteed value is taken from the credit exposure.
The payment of an order has been guaranteed for up to 50,000 USD in the form of a payment card but the total value of the order is 70,000 USD. You have defined a credit limit of 30,000 USD for the customer but the remaining 20,000 USD that have not been guaranteed with a payment guarantee are covered by Credit Management.
In Customizing, you can use the requirements for each credit check to control that a credit check is not run, even if all the items have been guaranteed.
You can find more information on financial documents in the SD Foreign Trade documentation for documentary payments.
Comparing Different Forms of Payment Guarantee
The forms of payment guarantee detailed here, provide all the possible ways to guarantee against the risk in receivables. The differences between them are listed in the master data and the following table provides a comparison of these differences:
Determining the Form of Payment Guarantee
Use
As more than one form of payment guarantee can be activated, you need a priority list to determine which form of guarantee should be used at a certain time.
This list is contained in the payment guarantee procedure which you can define in Customizing for Sales and Distribution. It contains all the forms of payment guarantee
permitted for the payer and document type, and controls the sequence in which the system assigns the sales document items to the forms of payment guarantee.
The system cannot assign a form of payment guarantee to a document if it has not been defined in the payment guarantee procedure.
The payment guarantee procedure is dependent on the customer and a document payment guarantee procedure. These can be determined in Customizing for Sales and Distribution.
Customer payment guarantee procedure
If you enter a sales document for a certain customer, the system uses the customer payment guarantee procedure to determine which payment guarantee procedure to use.
Document payment guarantee procedure
If you specify a certain type of sales document, the system uses a document payment guarantee procedure to determine which payment guarantee procedure to use.
The system combines the key for the document payment guarantee procedure in the sales document header and the key for the customer payment guarantee procedure in the customer master record to determine the payment guarantee procedure.
The system accesses the form of payment guarantee using the payment guarantee category and the following rules:
Payment cards are activated first if a payment card has been entered in the document.
Financial documentary payments are immediately active.
External export credit insurance is activated, if a valid contract exists. Requirements
You can also use requirements in Customizing (under Sales and Distribution → Basic Functions → Credit Management/Risk Management → Receivables Risk
Management → Define forms of payment guarantee) to determine when the system should not use a payment guarantee for the payment guarantee procedure you have entered. (For example, you might not require guarantees for the payment of item values of less than 10 USD or for a certain product group).
Calculating the Credit Value
In risk management, the credit value of a sales order is calculated as follows:
Total value = open confirmed quantities * credit price
(In the standard system the credit price is calculated by totaling the net value plus taxes.)
Guaranteed value = total value * guaranteed factor
Credit value = total value - guaranteed value
Settings for Credit Management and Risk Management:
Overview
The table below lists the most important settings that you make in Customizing for Credit Management. The relevant Implementation Guide (IMG) provides a detailed description of the individual activities.
Settings for
Access via Menu path
Creating credit data
(
Determine credit limit for customer)
Accounting application
Accounting → Financial accounting → Accounts receivable →Credit
management →Master data → Change
Credit control area Credit control area Enterprise Structure
Enterprise Structure → Structure maintenance → Definition →Financial
Customizing Accounting →
Maintain Credit Control Area Company code - Credit control area Enterprise Structure Customizing and Financial Accounting Customizing
Enterprise Structure → Structure
maintenance → Assignment →Financial Accounting →
Assign Company Code to Credit Control Area
and
Financial Accounting → Accounts
Receivable and Accounts Payable→ Credit Management → Credit Control Account → Assign Permitted Control Areas to
Company Code Company code - Credit control area Enterprise Structure Customizing
Enterprise Structure → Structure
maintenance → Assignment →Sales and Distribution →
Assign Sales Organization to Company Code Subdividing the credit control area Credit representative groups Financial Accounting Customizing
Financial Accounting → Accounts
Receivable and Accounts Payable→ Credit Management → Credit Control Account →
Define Credit Representative Groups Credit
representative
Financial Accounting Customizing
Financial Accounting → Accounts
Receivable and Accounts Payable→ Credit Management → Credit Control Account →
Define Credit Representative Groups Risk category Financial
Accounting Customizing
Financial Accounting → Accounts
Receivable and Accounts Payable→ Credit Management → Credit Control Account →
Define Risk Categories Sending a document with SAPoffice Sales and Distribution Customizing
Sales and Distribution → Basic
Functions → Credit Management/Risk Management→ Credit Management/Risk Management Settings →
Enter settings Defining credit
limit checks for
Automatic credit control
Sales and Distribution
Sales and Distribution → Basic
sales and distribution processing
Customizing Management→ Credit Management → Define Automatic Credit Control Risk management for receivables Define form of payment guarantee Sales and Distribution Customizing
Sales and Distribution → Basic
Functions → Credit Management/Risk Management→ Receivables risk management→
Define Forms of Payment Guarantee Define and assign payment guarantee procedures Sales and Distribution Customizing
Sales and Distribution → Basic
Functions → Credit Management/Risk Management→ Receivables risk management→
Define Forms of Payment Guarantee
Definitions
Credit Limit
Defines the credit limit amount in the currency of the credit control area.
Risk Category
Enables the credit manager to classify customers according to commercial risk. Along with the document type, the risk category helps to determine which kind of credit check the system automatically carries out. For example, you may want to carry out stringent checks at order receipt for high risk customers, but waive a credit check for customers with a very strong payment history.
Credit Representative Group
Defines a group of credit personnel - often a credit manager and a number of representatives - who are responsible for processing credit holds. Credit personnel use their group as one of the criteria for selecting overview lists of credit holds that need to be reviewed.
Date of Next Review
When a credit representative reviews the credit situation of a particular customer, he or she can manually enter a date for the next credit review. You can specify the next review date as one of the criteria that trigger an automatic credit check. For example, if you process a sales order later than the next review date, the system displays an error message, warning, or blocks the order.
Text
Provides a scratch pad where you can store credit-related text about a customer. The system indicates in the credit management status screen whether texts already exist for a customer.
Blocked
Enables credit personnel to block a customer for all business transactions.
External Credit Data
Allows you to enter credit data about a customer from external sources. The standard version of the SAP System is set up for Dun & Bradstreet data. For example, you can enter the D & B credit information number (DUNs number) that refers to the customer, as well as the D & B indicator and rating. You can also see how up-to-date the external information is by entering the date you last acquired data.
Customer Credit Group
Your credit manager can freely define groups of customers according to your needs. For example, you can define groups of customers by industry sector, by country, or by any
characteristic that will help you focus your credit management. Credit representatives can use these groups to help select credit holds for processing and to generate reports for statistical analysis.
